Tuesday, April 27, 2010

Milton Freidman on Greed



Capitalism is the only system that's ever worked in history. Remember we're talking about true capitalism with regulation that allows people to compete fairly and freely. Capitalism is not to be confused with Fascism, Corporatism, Crony Capitalism, or LBL Wrangler Capitalism! Milton Friedman is from the Chicago School of Economics and many of his theories were put into practice throughout the world. Google Chile and Boliva to get the details.

Monday, April 26, 2010

Sheehan on Boskin

You can thank Slick Willy for the manipulation of the statistics and H.W. Bush. You can't have politicians looking bad. It's a recovery based on the statistics?

Frederick Sheehan is the co-author of Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve.

His new book, Panderer for Power: The True Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession, was published by McGraw-Hill in November 2009. He was Director of Asset Allocation Services at John Hancock Financial Services in Boston. In this capacity, he set investment policy and asset allocation for institutional pension plans.


~~~

On January 14, 2010, an academic economist took a rare stance. Tenured professors rarely lift the veil from numbers that governments invent. In “Don’t Like the Numbers? Change ‘Em,” Michael J. Boskin, Ph.D., formerly, an economics professor at Harvard and Yale; formerly, chairman of the Counsel of Economic Advisers in the George H.W. Bush administration; currently, T. M. Friedman Professor of Economics at Stanford University; research associate at the National Bureau of Economic Research; senior fellow at the Hoover Institution; and board member of the Exxon Mobil Corporation, Oracle Corporation and Vodafone PLC (among others), wielded his sword.

The Wall Street Journal devoted a half page to Boskin’s list of offenders. Politicians are interfering with the Gross Domestic Product calculations in France and Venezuela. They have toyed with the inflation rate in Argentina. In the U.S., the Obama administration has taken the phony numbers game “to a new level.” Here, Boskin is writing of the current adminstration’s calculations of jobs “created or saved” from its stimulus bill.

The “created or saved” job calculation is nonsense, but the very last person one would expect to decry the miscarriages is Michael J. Boskin.

In the early 1990s, Senator Patrick Moynihan from New York warned his fellow legislators about rising social security commitments. Then the worm crawled out of his hole, so to speak. Federal Reserve Chairman Alan Greenspan testified before the Senate and House Budget Committee on January 10, 1995. He told the Committee the inflation rate was probably overestimated by 0.5% to 1.5%.

If Greenspan was correct, this was a godsend. Social security payments are increased each year at an inflation rate calculated by the federal government: the change in the Consumer Price Index (CPI). If the CPI could be increased at a lower rate in the future, benefits would rise more slowly, without Congressional action. This would reduce government spending and delight politicians, who knew of the looming crisis in social security but did not want to imperil their careers by reducing benefits, or, in this case, by cutting the rate at which social security benefits were raised each year.

The Boskin Commission was duly formed. Michael Boskin was the right man for the job. He had served as chairman of the President’s Council of Economic Advisers (CEA) from 1989 to 1993, a post previously held by such government functionaries as Arthur Burns and Alan Greenspan.

Jumping to the conclusion, the Boskin Commission’s Report, as it was known (formally, the “Advisory Commission to Study the Consumer Price Index”) found that inflation was overstated by 1.1%. Several recommendations were made by the Commission to the Budget Committee. These were instituted with great efficiency by the Bureau of Labor Statistics.

The changes have lopped off far more than 1.1% in most years since 1997. From the time the changes were instituted through 2008, the compounding of an artificially low Consumer Price Index reduced payments to social security recipients by about half (according to John Williams, author of the newsletter Shadow Government Statistics).

How the CPI calculation was changed is not important here. (Chapter 12 of my book Panderer to Power is devoted to the Boskin Commission.) One adjustment may help to understand Boskin’s contribution to the impoverishment of older Americans. “Hedonic adjustments” by government number crunchers substitute imaginary prices for prices actually paid. Hedonic adjustments (purportedly, the “quality improvement” of an item) reduce the CPI. (Hedonic adjustments had been employed before the Boskin Commission, but sparingly. Afterwards, even the prices of textbooks – if they had color graphics – were adjusted for quality.)

Steve Leuthold, founder and chief investment officer of the Leuthold Group, calculated the price of a new car in the U.S. had risen from $6,847 in 1979 to $27,940 in 2004. Using hedonic adjustments, the government calculated the price of a new car had risen from $6,847 in 1979 to $11,708 in 2004.

The Boskin Commission was one scandal that economists actually denounced. Greg Mankiw, chairman of George W. Bush’s Council of Economic Advisers from 2001-2003, said at the time “the debate about the CPI was really a political debate about how, and by how much, to cut real entitlements.”

Barry Bosworth of the Brookings Institute called the revised CPI an “ ‘immaculate conception‘ version of deficit reduction in which spending is cut without Congress taking the blame.”

Jack Triplett of the Brookings Institute extended the argument: “What I liked least about the Commission Report was exactly what made it so influential – its guesstimate of 1.1 percentage points of bias….The Commission (and others that have followed) used ad hoc reasoning to come up with a number….”

Jacob Ryten, from the Canadian statistical office, wrote in the same vein: “Without the guesstimates, the Commission Report was just another dry, academic study to be perused by professionals… Conversations with Committee members suggest that some, at least, were ill at ease themselves with guesstimates…. My personal preference is to resist the seductive blandishments of politics and politicians….”

Jack Triplett chided the Report as succumbing “to the lure of political statements in its choice of language to describe the effect of CPI measurement errors on Social Security expenditures…. Professionals at any rate, should understand that improving the accuracy of the CPI is not the same thing as improving the basis for allocation to the dependent population….”

Professionals, at any rate, have seen fit to keep Michael Boskin at the summit after he succumbed to “seductive blandishments of politics and politicians.” It cannot be said that Boskin dishonored his profession, since he is still a superstar. Other professions institute bodies such as the American Bar Association and the American Medical Association that take action against negligence.

Federal Reserve Chairman Ben S. Bernanke, another pliant alumnus of the CEA, sits before the Senate claiming there is no inflation in the economy. He uses the CPI as his measure, taking the additional step of removing food and energy costs.

Near the end of his Wall Street Journal effort, Boskin wrote of the Obama job numbers: “One piece of good news: The public isn’t believing much of this out-of-control spin.” He’s probably correct, but spinning the number of jobs “created or saved” has no consequence, other than to increase the public’s distrust of government. The distortion of the CPI should have been censured by his profession, if it is that.

Frederick Sheehan is the author of Panderer for Power: The True Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession
~~~

Wednesday, April 21, 2010

Healthcare Unsustainable Period.


Go to 5:20 in the video. 45 trillion in unfunded liabilities relating to healthcare costs. If you look at the Obama plan it's a pipe dream given the GDP growth rates. With made up government statistics we will probably hit the projected numbers but in the real economy things won't get better. Just google Boskin study if you want to see how these government figures are manipulated.
How are programs called entitlement programs when you pay into Social Security and Medicare your whole life? Money printing ends ugly!

Blunt Bill Black Hits the Nail on the Head!


Bill Black is the only person calling people out by name. Hopefully it's only a matter of time before people start going to jail. Social justice needs to be served.

Taxes: The Price We Pay For Civilization



"Taxes are the price we pay for a civilized society," said legendary Supreme Court Justice Oliver Wendell Holmes, Jr. As students of Buck v. Bell could tell you, Holmes had a habit of being monstrously wrong, but if he's right about taxes and civilization, it's certainly worth asking whether we're getting what we pay for.

Carrie Buck a poor girl who came from a very under privileged upbringing. Dr. James Hendren Bell was on the case. The Board of Directors issued an order for the sterilization of Buck, and her guardian appealed the case to the Circuit Court of Amherst County, which sustained the decision of the Board. The case then moved to the Supreme Court of Appeals of Virginia.

The appellate court sustained the sterilization law as compliant with both the state and federal constitutions, and it then went to the United States Supreme Court. The plaintiff's lawyers argued that this procedure ran counter to the protections of the 14th Amendment and 5th Amendment. They contended that the due process clause guarantees all adults the right to procreate which was being violated. They also made the argument that the equal protection clause in the 14th Amendment was being violated since not all similarly situated people were being treated the same. The sterilization law was only for the "feeble-minded" at certain state institutions and made no mention of other state institutions or those who were not in an institution.

On 2 May 1927, in an 8-1 decision, the Court accepted that she, her mother and her daughter were "feeble-minded" and "promiscuous," and that it was in the state's interest to have her sterilized. The ruling legitimized Virginia's sterilization procedures until they were repealed in 1974.

The ruling was written by Justice Oliver Wendell Holmes, Jr. In support of his argument that the interest of the states in a "pure" gene pool outweighed the interest of individuals in their bodily integrity, he argued:

“ We have seen more than once that the public welfare may call upon the best citizens for their lives. It would be strange if it could not call upon those who already sap the strength of the State for these lesser sacrifices, often not felt to be such by those concerned, in order to prevent our being swamped with incompetence. It is better for all the world, if instead of waiting to execute degenerate offspring for crime, or to let them starve for their imbecility, society can prevent those who are manifestly unfit from continuing their kind. The principle that sustains compulsory vaccination is broad enough to cover cutting the Fallopian tubes. ”

Holmes concluded his argument by infamously declaring that "Three generations of imbeciles are enough". The sole dissenter in the court, Justice Pierce Butler, declined to write a minority opinion.

Carrie Buck was operated upon, receiving a compulsory salpingectomy (a form of tubal ligation). She was later paroled from the institution as a domestic worker to a family in Bland, Virginia. She was an avid reader of coloring books until her death in 1983. Her daughter Vivian had been pronounced "feeble minded" after a cursory examination by ERO field worker Dr. Arthur Estabrook, thus the "three generations" of the majority opinion. It is worthy of noting that the child did very well in school for the two years that she attended (she died of complications from measles in 1932), even being listed on her school's honor roll in April 1931.

Historian Paul A. Lombardo argued in 1985 that Buck was not "feeble-minded" at all, but that she had been put away to hide her rape, perpetrated by the nephew of her adoptive mother. He also asserted that Buck's lawyer, Irving Whitehead, poorly argued her case, failed to call important witnesses, and was remarked by commentators to often not know what side he was on. It is now thought that this was not because of incompetence, but deliberate. Whitehead had close connections to the counsel for the institution and to Priddy. Whitehead was a member of the governing board of the state institution in which Buck resided, and had personally authorized Priddy's sterilization requests and was a strong supporter of eugenic sterilization.

Wow and we give this government the power to do these things. We aren't getting what we are paying for. Over 700 billion a year to interest on the national debt which is paid via income taxes to the bankers. Over 700 billion paid to fight wars which are illegal and could be avoided. Over 800 billion in Medicare and health care programs which will be increased with the new health care bill. Over 700 billion paid for social security which everyone has paid into yet our government has already spent this money. Yes this country is dead broke. Fortunately people are waking up and we the people will put a stop to this nonsensical spending. I'm really amazed at how many smart people approve of these policies.

Saturday, April 10, 2010

Steve Keen Debt Repudiation



Now here's a good idea that you never here from banks. Best solution I've heard yet.

1968 Minnesota Credit River Case

The most cynical (but not necessarily inaccurate) view of debt I've seen is that banks loan out imaginary money they don't really have, which was "collateralized" by capital they did not really have, based upon central bank printing presses which create money out of thin air which they don't really have. But then when debtors have trouble repaying onerous loans, the bankers seize real assets.

In First National Bank v. Daly (often referred to as the "Credit River" case) the court found that the bank created money "out of thin air":

[The president of the First National Bank of Montgomery] admitted that all of the money or credit which was used as a consideration [for the mortgage loan given to the defendant] was created upon their books, that this was standard banking practice exercised by their bank in combination with the Federal Reserve Bank of Minneaopolis, another private bank, further that he knew of no United States statute or law that gave the Plaintiff [bank] the authority to do this.
The court also held:

The money and credit first came into existence when they [the bank] created it.

Justice courts are just local courts, and not as powerful or prestigious as state supreme courts, for example. And it was not a judge, but a justice of the peace who made the decision.

But what is important is that the president of the First National Bank of Montgomery apparently admitted that his bank created money by simply making an entry in its book ...
The judge voided the mortgage, since he found that the bank hadn't given any real consideration, but simply created money out of thin air.

In other words, according to the most cynical view, the entire debt-money system is a scam ... and should be repudiated.


http://www.lawlibrary.state.mn.us/CreditRiver/CreditRiver.html

Austrian economist Murray Rothbard wrote in 1992:

I propose ... out-right debt repudiation. Consider this question: why should the poor, battered citizens of Russia or Poland or the other ex-Communist countries be bound by the debts contracted by their former Communist masters? In the Communist situation, the injustice is clear: that citizens struggling for freedom and for a free-market economy should be taxed to pay for debts contracted by the monstrous former ruling class. But this injustice only differs by degree from "normal" public debt. For, conversely, why should the Communist government of the Soviet Union have been bound by debts contracted by the Czarist government they hated and overthrew? And why should we, struggling American citizens of today, be bound by debts created by a ... ruling elite who contracted these debts at our expense?
***
Although largely forgotten by historians and by the public, repudiation of public debt is a solid part of the American tradition. The first wave of repudiation of state debt came during the 1840's, after the panics of 1837 and 1839. Those panics were the consequence of a massive inflationary boom fueled by the Whig-run Second Bank of the United States. Riding the wave of inflationary credit, numerous state governments, largely those run by the Whigs, floated an enormous amount of debt, most of which went into wasteful public works (euphemistically called "internal improvements"), and into the creation of inflationary banks. Outstanding public debt by state governments rose from $26 million to $170 million during the decade of the 1830's. Most of these securities were financed by British and Dutch investors.

During the deflationary 1840's succeeding the panics, state governments faced repayment of their debt in dollars that were now more valuable than the ones they had borrowed. Many states, now largely in Democratic hands, met the crisis by repudiating these debts, either totally or partially by scaling down the amount in "readjustments." Specifically, of the 28 American states in the 1840's, nine were in the glorious position of having no public debt, and one (Missouri's) was negligible; of the 18 remaining, nine paid the interest on their public debt without interruption, while another nine (Maryland, Pennsylvania, Indiana, Illinois, Michigan, Arkansas, Louisiana, Mississippi, and Florida) repudiated part or all of their liabilities. Of these states, four defaulted for several years in their interest payments, whereas the other five (Michigan, Mississippi, Arkansas, Louisiana, and Florida) totally and permanently repudiated their entire outstanding public debt. As in every debt repudiation, the result was to lift a great burden from the backs of the taxpayers in the defaulting and repudiating states.
***
The next great wave of state debt repudiation came in the South after the blight of Northern occupation and Reconstruction had been lifted from them. Eight Southern states (Alabama, Arkansas, Florida, Louisiana, North Carolina, South Carolina, Tennessee, and Virginia) proceeded, during the late 1870's and early 1880's under Democratic regimes, to repudiate the debt foisted upon their taxpayers by the corrupt and wasteful carpetbag Radical Republican governments under Reconstruction.

As always the Austian School of Economics makes the most sense!

Friday, April 9, 2010

If Ron Paul Wins Another Straw Poll Republicans May Stop Using Them!



If Ron Paul Wins Another Straw Poll Republicans May Stop Using Them!

The people are speaking of real change! Both Democrats and Republicans are out of touch. Lindsey Graham says "George Bush is the Winston Churchill of our time". More like the Henry Kissinger of our time.

Current Unemployment



Current Unemployment Chart U3 9.7%, U6 17%, Real total unemployment without the BLS(Bureau of Labor Statistics) 22%

How BLS defines the unemployed:
U1: Percentage of labor force unemployed 15 weeks or longer.
U2: Percentage of labor force who lost jobs or completed temporary work.
U3: Official unemployment rate per ILO definition.
U4: U3 + "discouraged workers", or those who have stopped looking for work because current economic conditions make them believe that no work is available for them.
U5: U4 + other "marginally attached workers", or "loosely attached workers", or those who "would like" and are able to work, but have not looked for work recently.
U6: U5 + Part time workers who want to work full time, but cannot due to economic reasons (underemployment).

Thursday, April 8, 2010

Who Really Has all the Real Money...Gold

Continuing on the trail of exposing what is rapidly becoming one of the largest frauds in commodity markets history is the most recent interview by Eric King with GATA's Adrian Douglas, Harvey Orgen (who recently testified before the CFTC hearing) and his son, Lenny, in which the two discuss their visit to the only bullion bank vault in Canada, that of ScotiaMocatta, located at 40 King Street West in Toronto, and find the vault is practically empty. This is a relevant segue to a class action lawsuit filed against Morgan Stanley, which was settled out of court, in which it was alleged that Morgan Stanley told clients it was selling them precious metals that they would own in full and that the company would store, yet even despite charging storage fees was not in actual possession of the bullion. It appears that this kind of lack of physical holdings by all who claim to have gold in storage, is pervasive as the actual gold globally is held primarily in paper or electronic form. Lenny Organ who was the person to enter the vault of ScotiaMocatta, says "What shocked me was how little gold and silver they actually had." Lenny describes exactly how much (or little as the case may be) silver was available - roughly 60,000 ounces. As for gold - 210 400 oz bars, 4,000 maples, 500 eagles, 10 kilo bars, 10 one kilogram pieces of gold nugget form, which Adrian Douglas calculates as being $100 million worth, which is just one tenth of what the Royal Mint of Canada sold in 2008, or over $1 billion worth of gold. As Orgen concludes: "The game ends when the people who own all these paper obligations say enough and take physical delivery, and that's when the mess will occur."

Also note the interesting detour into what Stephan Spicer of the Central Fund Of Canada, said regarding his friend at a major bank, who wanted access to his 15,000 oz of silver, and had to wait 6-8 weeks for its to be flown in from Hong Kong.


It is funny that central bankers thought they could take the ponzi mentality of infinite dilution of all assets coupled with infinite debt issuance, as they have done to fiat money, and apply it to gold, in essence piling leverage upon leverage. They underestimated gold holders' willingness to be diluted into perpetuity - when the realization that gold owned is just 1% of what is physically deliverable, you will see the biggest bank run in history.

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/4/7_Andrew_Maguire_%26_Adrian_Douglas.html